Small ad firms choke under pressure from Google, Facebook

The freewheeling market share expansion of internet companies Facebook (FB) and Google (GOOGL, GOOG) often gives the impression that the prevailing antitrust laws are not applicable to them. That could be the reason why Google has become synonymous with internet search and we have only a couple of successful social networking platforms.

While the issue of big companies eating into the market shares of their smaller counterparts and ultimately eclipsing the latter remains a cause for concern across the corporate world, it is a bit more complicated in the technology sector.

A report published by The New York Times the other day shows the number of small-scale advertising companies declined significantly in the past five years, and cites the unchallenged dominance of Google and Facebook in the digital space as the reason.

The issue of big companies eating into the market shares of their smaller counterparts is a bit complicated in the technology sector

The outlook for the sector is quite bullish, which indicates that major global brands will be scaling up their spending on digital advertising to the tune of up to 50% in the next five years. Higher ad spending provisions, combined with technological advancements, will see more advertisers hitting the web to promote their products and services in future.

According to a market survey, based on which the report was prepared, there were only about 185 independent advertising companies as of the second quarter of 2018, which is 21% lower compared to 2013. Also, there has been a drastic fall in the amount of venture capital flowing into tech startups, something which has been crippling their prospects.

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“Online advertising companies have struggled for several years as Google and Facebook solidified their grip on digital dollars, slowing revenue for the others,” stated the report.  It says Google and Facebook accounted for nearly 90% of the total amount spent on digital advertising last year.

The clout of the tech biggies in the ad space is such that even Amazon (AMZN) is finding it difficult to gain a foothold in the lucrative sector. However, the e-commerce giant is slowly making its presence felt in online advertising and is likely to grab whatever market share is left there, mainly by attracting customers looking for product details before making their purchases.